<PAGE>


                              EMPLOYMENT AGREEMENT


         This EMPLOYMENT AGREEMENT is made and entered into as of the 12th day
of February, 2001 (the "Effective Date"), by and between Cinergy and R. Foster
Duncan (the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.

                                    RECITALS

         A. The Executive is qualified and available to assume responsibility
for and hold the position of Executive Vice President and Chief Financial
Officer of Cinergy. Cinergy desires to secure the employment of the Executive in
accordance with this Agreement.

         B. The Executive is willing to enter and continue to remain in the
employ of Cinergy, and any successor to Cinergy, on the terms and conditions set
forth in this Agreement.

                                    AGREEMENT

         In consideration of the mutual promises, covenants and agreements set
forth below, the parties agree as follows:

1.       EMPLOYMENT AND TERM

         a.       Cinergy, and any successor to Cinergy, agree to employ the
                  Executive, and the Executive agrees to enter and remain in the
                  employ of Cinergy, in accordance with the terms and provisions
                  of this Agreement, for the Employment Period set forth in
                  Subsection b. The parties agree that the Company will be
                  responsible for carrying out all of the promises, covenants,
                  and agreements of Cinergy set forth in this Agreement.

         b.       The Employment Period of this Agreement will commence as of
                  the Effective Date and continue until December 31, 2003;
                  provided that, commencing on December 31, 2001, and on each
                  subsequent December 31, the Employment Period will be extended
                  for one (1) additional year unless either party gives the
                  other party written notice not to extend this Agreement at
                  least ninety (90) days before the extension would otherwise
                  become effective.

2.       DUTIES AND POWERS OF EXECUTIVE

         a.       POSITION. The Executive will serve Cinergy as Executive Vice
                  President and Chief Financial Officer, and he will have such
                  responsibilities, duties, and authority as are customary for
                  someone of that position and such additional duties,
                  consistent with his position, as may be assigned to him from
                  time to time during the Employment Period by the Board of
                  Directors or the Chief Executive Officer.

<PAGE>


         b.       PLACE OF PERFORMANCE. In connection with the Executive's
                  employment, the Executive will be based at the principal
                  executive offices of Cinergy, 221 East Fourth Street,
                  Cincinnati, Ohio, and, except for required business travel to
                  an extent substantially consistent with the present business
                  travel obligations of Cinergy executives who have positions of
                  authority comparable to that of the Executive, the Executive
                  will not be required to relocate to a new principal place of
                  business that is more than thirty (30) miles from Cinergy's
                  current principal executive offices.

3.       COMPENSATION. The Executive will receive the following compensation for
         his services under this Agreement.

         a.       SALARY. The Executive's Annual Base Salary, payable not less
                  often than semi-monthly, will be at the annual rate of not
                  less than $475,000.00. The Board of Directors or its designee
                  may, from time to time, increase the Annual Base Salary as the
                  Board of Directors deems to be necessary or desirable,
                  including without limitation adjustments to reflect increases
                  in the cost of living. Any increase in the Annual Base Salary
                  will not serve to limit or reduce any other obligation of
                  Cinergy under this Agreement. The Annual Base Salary will not
                  be reduced except for across-the-board salary reductions
                  similarly affecting all Cinergy management personnel. If
                  Annual Base Salary is increased during the Employment Period,
                  then the increased salary will be the Annual Base Salary for
                  all purposes under this Agreement.

         b.       RETIREMENT, INCENTIVE, WELFARE BENEFIT PLANS AND OTHER
                  BENEFITS. During the Employment Period, the Executive will be
                  eligible, and Cinergy will take all necessary action to cause
                  the Executive to become eligible, to participate in all
                  short-term and long-term incentive, stock option, restricted
                  stock, performance unit, savings, retirement and welfare
                  plans, practices, policies and programs applicable generally
                  to employees and/or other senior executives of Cinergy who are
                  considered Tier II executives for compensation purposes,
                  except with respect to any plan, practice, policy or program
                  to which the Executive has waived his rights in writing.

                  The Executive will be a participant in the Senior Executive
                  Supplement portion of the Cinergy Corp. Supplemental Executive
                  Retirement Plan and will be fully and immediately vested, as
                  of the Effective Date of this Agreement, in any benefit that
                  he accrues under that plan.

                  Upon his retirement on or after having attained age fifty
                  (50), the Executive will be eligible for comprehensive medical
                  and dental insurance pursuant to the terms of the Retirees'
                  Medical Plan and the Retirees' Dental Plan. The Executive,
                  however, will receive the full subsidy provided by Cinergy to
                  retirees, as of the Effective Date of this Agreement, for
                  purposes of determining the amount of monthly premiums due
                  from the Executive.


                                       -2-
<PAGE>


                  The Executive will be a participant in the Annual Incentive
                  Plan, and the Executive will be paid pursuant to that plan an
                  annual benefit of up to ninety percent (90%) of the
                  Executive's Annual Base Salary, with a target of no less than
                  sixty percent (60%) of the Executive's Annual Base Salary (the
                  "Target Annual Bonus"); provided, however, the guaranteed
                  minimum bonus for the years 2001 and 2002 will be no less than
                  $190,000.00 per year.

                  The Executive will be a participant in the Long-Term Incentive
                  Plan (the "LTIP"), and the Executive's annualized target award
                  opportunity under the LTIP will be equal to no less than
                  ninety percent (90%) of his Annual Base Salary (the "Target
                  LTIP Bonus").

                  The Company will grant an option to acquire 200,000 shares of
                  the Company's common stock pursuant to an option granted under
                  the terms of the Company's 1996 Long-Term Incentive
                  Compensation Plan, which options will vest ratably over a five
                  year period from the date of grant with a grant price based on
                  the "fair market value" of a share of the Company's common
                  stock as set forth in the terms of the plan document.

         c.       TRANSITION ALLOWANCE. On the Effective Date or as soon
                  thereafter as administratively feasible, Cinergy will pay to
                  the Executive the sum of $250,000.00 (reduced by applicable
                  federal, state, and local tax withholding), as a transition
                  allowance as consideration for the Executive's decision to
                  accept employment with Cinergy and adhere to the terms of this
                  Agreement.

         d.       FRINGE BENEFITS AND PERQUISITES. During the Employment Period,
                  the Executive will be entitled to the following additional
                  fringe benefits:

                  (i)      Cinergy will furnish to the Executive an automobile
                           and will pay all of the related expenses for
                           gasoline, insurance, maintenance, and repairs.

                  (ii)     Cinergy will pay the initiation fee and the annual
                           dues, assessments, and other membership charges of
                           the Executive for membership in a country club and a
                           luncheon club selected by the Executive.

                  (iii)    Cinergy will provide paid vacation for four (4) weeks
                           per year (or longer if permitted by Cinergy's
                           policy).

                  (iv)     Cinergy will provide benefits under the Executive
                           Supplement Life Program.

                  (v)      Cinergy will pay to relocate the Executive and his
                           immediate family to the Cincinnati, Ohio area under
                           the terms of the Relocation Program.

                  (vi)     Cinergy will furnish to the Executive an annual
                           physical exam and annual financial planning and tax
                           preparation services. In addition, the Executive will
                           be entitled to receive such other fringe benefits in
                           accordance with


                                       -3-
<PAGE>


                           Cinergy plans, practices, programs, and policies in
                           effect from time to time, commensurate with his
                           position and at least comparable to those received
                           by other Cinergy senior executives.

         e.       EXPENSES. Cinergy agrees to reimburse the Executive for all
                  expenses, including those for travel and entertainment,
                  properly incurred by him in the performance of his duties
                  under this Agreement in accordance with the policies
                  established from time to time by the Board of Directors.

         f.       RELOCATION BENEFITS. Following termination of the Executive's
                  employment for any reason (other than death), the Executive
                  will be entitled to reimbursement from Cinergy for the
                  reasonable costs of relocating from the Cincinnati, Ohio, area
                  to a new primary residence in the forty-eight contiguous
                  United States in a manner that is consistent with the terms of
                  the Relocation Program.

4.       TERMINATION OF EMPLOYMENT

         a.       DEATH. The Executive's employment will terminate automatically
                  upon the Executive's death during the Employment Period.

         b.       BY CINERGY FOR CAUSE. Cinergy may terminate the Executive's
                  employment during the Employment Period for Cause. For
                  purposes of this Employment Agreement, "Cause" means the
                  following:

                  (i)      The willful and continued failure by the Executive to
                           substantially perform the Executive's duties with
                           Cinergy (other than any such failure resulting from
                           the Executive's incapacity due to physical or mental
                           illness) after the Board of Directors or the Chief
                           Executive Officer has delivered to the Executive a
                           written demand for substantial performance, which
                           demand specifically identifies the manner in which
                           the Executive has not substantially performed his
                           duties. This event will constitute Cause even if the
                           Executive issues a Notice of Termination for Good
                           Reason pursuant to Subsection 4d after the Board of
                           Directors or Chief Executive Officer delivers a
                           written demand for substantial performance.

                  (ii)     The breach by the Executive of the confidentiality
                           provisions set forth in Section 9.

                  (iii)    The conviction of the Executive for the commission of
                           a felony, including the entry of a guilty or nolo
                           contendere plea, or any willful or grossly negligent
                           action or inaction by the Executive that has a
                           materially adverse effect on Cinergy. For purposes of
                           this definition of Cause, no act, or failure to act,
                           on the Executive's part will be deemed "willful"
                           unless it is done, or omitted to be done, by the
                           Executive in bad faith and without reasonable belief
                           that the Executive's act, or failure to act, was in
                           the best interest of Cinergy.


                                    -4-
<PAGE>


         c.       BY CINERGY WITHOUT CAUSE. Cinergy may, upon at least 30 days
                  advance written notice to the Executive, terminate the
                  Executive's employment during the Employment Period for a
                  reason other than Cause, but the obligations placed upon
                  Cinergy in Section 5 will apply.

         d.       BY THE EXECUTIVE FOR GOOD REASON. The Executive may terminate
                  his employment during the Employment Period for Good Reason.
                  For purposes of this Agreement, "Good Reason" means the
                  following:

                  (i)      A reduction in the Executive's Annual Base Salary,
                           except for across-the-board salary reductions
                           similarly affecting all Cinergy management personnel,
                           or a reduction in any other benefit or payment
                           described in Section 3 of this Agreement, except for
                           changes to the employee benefits programs affecting
                           all Cinergy management personnel, provided that those
                           changes (either individually or in the aggregate)
                           will not result in a material adverse change with
                           respect to the benefits to which the Executive was
                           entitled as of the Effective Date.

                  (ii)     The material reduction without his consent of the
                           Executive's title, authority, duties, or
                           responsibilities from those in effect immediately
                           prior to the reduction or a material adverse change
                           in the Executive's reporting responsibilities.

                  (iii)    Any breach by Cinergy of any other material provision
                           of this Agreement (including but not limited to the
                           place of performance as specified in Subsection 2b).

                  (iv)     The Executive's disability due to physical or mental
                           illness or injury that precludes the Executive from
                           performing any job for which he is qualified and able
                           to perform based upon his education, training or
                           experience.

                  (v)      A failure by any successor entity to the Company to
                           assume all of the Company's obligations to the
                           Executive under this Agreement.

         e.       BY THE EXECUTIVE WITHOUT GOOD REASON. The Executive may
                  terminate his employment without Good Reason upon prior
                  written notice to the Company.

         f.       NOTICE OF TERMINATION. Any termination of the Executive's
                  employment by Cinergy or by the Executive during the
                  Employment Period (other than a termination due to the
                  Executive's death) will be communicated by a written Notice of
                  Termination to the other party to this Agreement in accordance
                  with Subsection 12b. For purposes of this Agreement, a "Notice
                  of Termination" means a written notice that specifies the
                  particular provision of this Agreement relied upon and that
                  sets forth in reasonable detail the facts and circumstances
                  claimed to provide a basis for terminating the Executive's
                  employment under the


                                   -5-
<PAGE>


                  specified provision. The failure by the Executive or
                  Cinergy to set forth in the Notice of Termination any fact
                  or circumstance that contributes to a showing of Good
                  Reason or Cause will not waive any right of the Executive
                  or Cinergy under this Agreement or preclude the Executive
                  or Cinergy from asserting that fact or circumstance in
                  enforcing rights under this Agreement.

5.       OBLIGATIONS OF CINERGY UPON TERMINATION.

         a.       CERTAIN TERMINATIONS.

                  (i)      If a Termination occurs during the Employment Period,
                           Cinergy will pay to the Executive a lump sum amount,
                           in cash, equal to the sum of the following Accrued
                           Obligations:

                           (1)      the Executive's Annual Base Salary through
                                    the Date of Termination to the extent not
                                    previously paid;

                           (2)      an amount equal to the AIP Benefit for the
                                    fiscal year that includes the Date of
                                    Termination multiplied by a fraction, the
                                    numerator of which is the number of days
                                    from the beginning of that fiscal year to
                                    and including the Date of Termination and
                                    the denominator of which is three hundred
                                    and sixty-five (365). The AIP Benefit
                                    component of the calculation will be
                                    determined using a percentage determined by
                                    the Chief Executive Officer, in his
                                    discretion, up to the maximum percentage
                                    specified in Subsection 3b, but no less than
                                    the Target Annual Bonus; and

                           (3)      any vested Deferred Compensation (together
                                    with any accrued interest or earnings) and
                                    any accrued vacation pay, in each case to
                                    the extent not previously paid.

                           The Accrued Obligations described in this Paragraph
                           5a(i) will be paid within thirty (30) days after the
                           Date of Termination. These Accrued Obligations are
                           payable to the Executive regardless of whether a
                           Change in Control has occurred.

                  (ii)     In the event of a Termination prior to, or greater
                           than twenty-four (24) months subsequent to, the
                           occurrence of a Change in Control, and other than by
                           reason of the Executive's death, Cinergy will pay the
                           Accrued Obligations, and Cinergy will have the
                           following obligations:

                           (1)      Cinergy will pay to the Executive a lump sum
                                    amount, in cash, equal to two (2) times the
                                    sum of the Annual Base Salary and the Target
                                    Annual Bonus. For this purpose, the Annual
                                    Base Salary will be at the rate in effect at
                                    the time Notice of Termination is given
                                    (without giving effect to any reduction in
                                    Annual Base


                                   -6-
<PAGE>


                                    Salary, if any, prior to the termination).
                                    This lump sum will be paid within thirty
                                    (30) days of the Date of Termination.

                           (2)      Cinergy will pay to the Executive the value
                                    of (A) any Deferred Compensation, beyond
                                    that included in the Accrued Obligations and
                                    (B) any benefits under the Executive
                                    Supplemental Life Program, to the extent
                                    that these amounts are vested and payable
                                    under the terms of the applicable plan or
                                    program as of the Date of Termination.

                           (3)      Except as provided under Clauses (A) and (B)
                                    below, Cinergy will continue, until the end
                                    of the Employment Period, medical and dental
                                    benefits to the Executive and/or the
                                    Executive's family at least equal to those
                                    that would have been provided if the
                                    Executive's employment had not been
                                    terminated (excluding benefits to which the
                                    Executive has waived his rights in writing).
                                    The benefits described in the preceding
                                    sentence will be in accordance with the
                                    medical and welfare benefit plans,
                                    practices, programs, or policies of Cinergy
                                    (the "M&W Plans") as then currently in
                                    effect and applicable generally to other
                                    Cinergy senior executives and their
                                    families.

                                    (A)     If, as of the Executive's Date of
                                            Termination, the Executive meets the
                                            eligibility requirements for
                                            Cinergy's retiree medical and
                                            welfare benefit plans, the provision
                                            of those retiree medical and welfare
                                            benefit plans to the Executive will
                                            satisfy Cinergy's obligation under
                                            this Subparagraph 5a(ii)(3).

                                    (B)      If, as of the Executive's Date of
                                             Termination, the provision to the
                                             Executive of the M&W Plan benefits
                                             described in this Subparagraph
                                             5a(ii)(3) would either (1) violate
                                             the terms of the M&W Plans or (2)
                                             violate any of the Code's
                                             nondiscrimination requirements
                                             applicable to the M&W Plans, then
                                             Cinergy, in its sole discretion,
                                             may elect to pay the Executive, in
                                             lieu of the M&W Plan benefits
                                             described under this Subparagraph
                                             5a(ii)(3), a lump sum cash payment
                                             equal to the total monthly premiums
                                             that would have been paid by
                                             Cinergy for the Executive under the
                                             M&W Plans from the Date of
                                             Termination through the end of the
                                             Employment Period. Nothing in this
                                             Clause will affect the Executive's
                                             right to elect COBRA continuation
                                             coverage under a M&W Plan in
                                             accordance with applicable law.


                                    -7-
<PAGE>


                                    (C)     If the Executive becomes employed by
                                            another employer and is eligible to
                                            receive medical or other welfare
                                            benefits under another
                                            employer-provided plan, any benefits
                                            provided to the Executive under the
                                            M&W Plans will be secondary to those
                                            provided under the other
                                            employer-provided plan during the
                                            Executive's applicable period of
                                            eligibility.

                           (4)      Ownership of the automobile assigned to the
                                    Executive by Cinergy will be transferred to
                                    the Executive within 30 days of the Date of
                                    Termination. The effect of this transfer
                                    will be grossed up for federal and state
                                    income taxes as soon as administratively
                                    feasible after the transfer is effective.

                           (5)      Cinergy will provide tax counseling services
                                    through an agency selected by the Executive,
                                    not to exceed Fifteen Thousand Dollars
                                    ($15,000.00) in cost.

                  (iii)    In the event of Termination upon or during the
                           twenty-four (24) month period after the occurrence of
                           a Change in Control, then in lieu of any further
                           salary payments to the Executive for periods
                           subsequent to the Date of Termination and in lieu of
                           any other benefits payable pursuant to Paragraph
                           5a(ii), Cinergy will have the following obligations:

                           (1)      Cinergy will pay to the Executive a lump sum
                                    severance payment, in cash, equal to three
                                    (3) times the higher of (x) the sum of the
                                    Executive's current Annual Base Salary and
                                    AIP Benefit, or (y) the sum of the Executive
                                    Annual Base Salary in effect immediately
                                    prior to the Change in Control and his AIP
                                    Benefit for the year preceding that in which
                                    the Date of Termination occurs or in the
                                    year preceding that in which the Change in
                                    Control occurs; and

                           (2)     Cinergy will pay to the Executive the value
                                   of (A) any Deferred Compensation, beyond that
                                   included in the Accrued Obligations and (B)
                                   any benefits under the Executive Supplemental
                                   Life Program, to the extent that these
                                   amounts are vested and payable under the
                                   terms of the applicable plan or program as of
                                   the Date of Termination.


                           (3)     For a thirty-six (36) month period after the
                                   Date of Termination, Cinergy will arrange to
                                   provide the Executive with life, disability,
                                   accident, and health insurance benefits
                                   substantially similar to those that the
                                   Executive is receiving immediately prior to
                                   the Notice of Termination (without giving
                                   effect to any reduction in those benefits
                                   subsequent to a Change in Control that
                                   constitutes Good Reason), except for any
                                   benefits that were waived by the Executive in
                                   writing. If Cinergy arranges to provide the
                                   Executive with life,


                                   -8-
<PAGE>


                                    disability, accident, and health
                                    insurance benefits, those benefits will
                                    be reduced to the extent comparable
                                    benefits are actually received by or made
                                    available to the Executive without cost
                                    during the thirty-six (36) month period
                                    following the Executive's Date of
                                    Termination. The Executive must report to
                                    Cinergy any such benefits that he
                                    actually receives. In lieu of the
                                    benefits described in the preceding
                                    sentences, Cinergy, in its sole
                                    discretion, may elect to pay to the
                                    Executive a lump sum cash payment equal
                                    to thirty-six (36) times the monthly
                                    premiums that would have been paid by
                                    Cinergy to provide those benefits to the
                                    Executive. Nothing in this Subparagraph
                                    5a(iii)(3) will affect the Executive's
                                    right to elect COBRA continuation
                                    coverage in accordance with applicable
                                    law.

                           (4)      Ownership of the automobile assigned to the
                                    Executive by Cinergy will be transferred to
                                    the Executive within 30 days of the Date of
                                    Termination. The effect of this transfer
                                    will be grossed up for federal and state
                                    income taxes as soon as administratively
                                    feasible after the transfer is effective.


                           (5)      Cinergy will provide tax counseling services
                                    through an agency selected by the Executive,
                                    not to exceed Fifteen Thousand Dollars
                                    ($15,000.00) in cost.

                           For purposes of this Paragraph (iii), the Executive
                           will be deemed to have incurred a Termination
                           following a Change in Control if the Executive's
                           employment is terminated prior to a Change in
                           Control, without Cause at the direction of a Person
                           who has entered into an agreement with Cinergy, the
                           consummation of which will constitute a Change in
                           Control, or if the Executive terminates his
                           employment for Good Reason prior to a Change in
                           Control if the circumstances or event that
                           constitutes Good Reason occurs at the direction of
                           such a Person.

         b.       TERMINATION BY CINERGY FOR CAUSE OR BY THE EXECUTIVE OTHER
                  THAN FOR GOOD REASON. Subject to the provisions of Section 7,
                  and notwithstanding any other provisions of this Agreement, if
                  the Executive's employment is terminated for Cause during the
                  Employment Period, or if the Executive terminates employment
                  during the Employment Period other than a termination for Good
                  Reason, Cinergy will have no further obligations to the
                  Executive under this Agreement other than the obligation to
                  pay to the Executive the Accrued Obligations, plus any other
                  earned but unpaid compensation, in each case to the extent not
                  previously paid.

         c.       CERTAIN TAX CONSEQUENCES.

                  (i)      In the event that any Severance Benefits paid or
                           payable to the Executive or for his benefit pursuant
                           to the terms of this Agreement or otherwise in
                           connection with, or arising out of, his employment
                           with Cinergy or a


                                      -9-
<PAGE>


                           change in ownership or effective control of
                           Cinergy or of a substantial portion of its assets
                           (a "Payment" or "Payments") would be subject to
                           any Excise Tax, then the Executive will be
                           entitled to receive an additional payment (a
                           "Gross-Up Payment") in an amount such that after
                           payment by the Executive of all taxes (including
                           any interest, penalties, additional tax, or
                           similar items imposed with respect thereto and the
                           Excise Tax), including any Excise Tax imposed upon
                           the Gross-Up Payment, the Executive retains an
                           amount of the Gross-Up Payment equal to the Excise
                           Tax imposed upon the Payments.

                  (ii)     An initial determination as to whether a Gross-Up
                           Payment is required pursuant to this Agreement and
                           the amount of that Gross-Up Payment will be made at
                           Cinergy's expense by an Accounting Firm selected by
                           the Executive and reasonably acceptable to Cinergy.
                           The Accounting Firm will provide its determination,
                           together with detailed supporting calculations and
                           documentation, to Cinergy and the Executive within 10
                           days after the Date of Termination, or such other
                           time as requested by Cinergy or by the Executive, and
                           if the Accounting Firm determines that no Excise Tax
                           is payable by the Executive with respect to a Payment
                           or Payments, it will furnish the Executive with an
                           opinion reasonably acceptable to the Executive that
                           no Excise Tax will be imposed with respect to any
                           such Payment or Payments. Within 10 days after the
                           Accounting Firm delivers its determination to the
                           Executive, the Executive will have the right to
                           dispute the determination. The Gross-Up Payment, if
                           any, as determined pursuant to this Subsection 5c
                           will be paid by Cinergy to the Executive within five
                           days of the receipt of the Accounting Firm's
                           determination. The existence of a dispute will not in
                           any way affect the Executive's right to receive the
                           Gross-Up Payment in accordance with the
                           determination. If there is no dispute, the
                           determination will be binding, final, and conclusive
                           upon Cinergy and the Executive. If there is a
                           dispute, then Cinergy and the Executive will together
                           select a second Accounting Firm, which will review
                           the determination and the Executive's basis for the
                           dispute and then will render its own determination,
                           which will be binding, final, and conclusive on
                           Cinergy and on the Executive. Cinergy will bear all
                           costs associated with that determination, unless the
                           determination is not greater than the initial
                           determination, in which case all such costs will be
                           borne by the Executive.

                  (iii)    The value of any non-cash benefits or any deferred
                           payment or benefit paid or payable to the Executive
                           will be determined in accordance with the principles
                           of Code paragraphs 280G(d)(3) and (4). For purposes
                           of determining the amount of the Gross-Up Payment,
                           the Executive will be deemed to pay federal income
                           taxes at the highest marginal rate of federal income
                           taxation in the calendar year in which the Gross-Up
                           Payment is to be made and applicable state and local
                           income taxes at the highest marginal rate of taxation
                           in the state and locality of the Executive's


                                 -10-
<PAGE>

                           residence on the Date of Termination, net of the
                           maximum reduction in federal income taxes that would
                           be obtained from deduction of those state and local
                           taxes.

                  (iv)     Notwithstanding anything contained in this Agreement
                           to the contrary, in the event that, according to the
                           Accounting Firm's determination, an Excise Tax will
                           be imposed on any Payment or Payments, Cinergy will
                           pay to the applicable government taxing authorities
                           as Excise Tax withholding, the amount of the Excise
                           Tax that Cinergy has actually withheld from the
                           Payment or Payments in accordance with law.

         d.       VALUE CREATION PLAN AND STOCK OPTIONS. Upon the Executive's
                  termination of employment for any reason, the Executive's
                  entitlement to restricted shares and performance shares under
                  the Value Creation Plan and any stock options granted under
                  the Stock Option Plan or the LTIP will be determined under the
                  terms of the appropriate plan and any applicable
                  administrative guidelines and written agreements.

         e.       OTHER FEES AND EXPENSES. Cinergy will also pay to the
                  Executive all legal fees and expenses incurred by the
                  Executive in successfully disputing a Termination that
                  entitles the Executive to Severance Benefits. Payment will be
                  made within five (5) business days after delivery of the
                  Executive's written request for payment accompanied by such
                  evidence of fees and expenses incurred as Cinergy reasonably
                  may require.

6.       NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement will prevent or
         limit the Executive's continuing or future participation in any
         benefit, plan, program, policy, or practice provided by Cinergy and for
         which the Executive may qualify, except with respect to any benefit to
         which the Executive has waived his rights in writing or any plan,
         program, policy, or practice that expressly excludes the Executive from
         participation. In addition, nothing in this Agreement will limit or
         otherwise affect the rights the Executive may have under any other
         contract or agreement with Cinergy entered into after the Effective
         Date. Amounts that are vested benefits or that the Executive is
         otherwise entitled to receive under any benefit, plan, program, policy,
         or practice of, or any contract or agreement entered into after the
         Effective Date with Cinergy, at or subsequent to the Date of
         Termination, will be payable in accordance with that benefit, plan,
         program, policy or practice, or that contract or agreement, except as
         explicitly modified by this Agreement.

7.       FULL SETTLEMENT: MITIGATION. Cinergy's obligation to make the payments
         provided for in this Agreement and otherwise to perform its obligations
         under this Agreement will not be affected by any set-off, counterclaim,
         recoupment, defense, or other claim, right, or action that Cinergy may
         have against the Executive or others. In no event will the Executive be
         obligated to seek other employment or take any other action by way of
         mitigation of the amounts (including amounts for damages for breach)
         payable to the Executive under any of the provisions of this Agreement
         and, except as provided in Subparagraphs 5a(ii)(3)

                                     -11-

<PAGE>

         and 5a(iii)(3), those amounts will not be reduced simply because
         the Executive obtains other employment. If the Executive finally
         prevails on the substantial claims brought with respect to any
         dispute between Cinergy and the Executive as to the interpretation,
         terms, validity, or enforceability of (including any dispute about
         the amount of any payment pursuant to) this Agreement, Cinergy
         agrees to pay all reasonable legal fees and expenses that the
         Executive may reasonably incur as a result of that dispute.

8.       ARBITRATION. The parties agree that any dispute, claim, or controversy
         based on common law, equity, or any federal, state, or local statute,
         ordinance, or regulation (other than workers' compensation claims)
         arising out of or relating in any way to the Executive's employment,
         the terms, benefits, and conditions of employment, or concerning this
         Agreement or its termination and any resulting termination of
         employment, including whether such a dispute is arbitrable, shall be
         settled by arbitration. This agreement to arbitrate includes but is not
         limited to all claims for any form of illegal discrimination, improper
         or unfair treatment or dismissal, and all tort claims. The Executive
         will still have a right to file a discrimination charge with a federal
         or state agency, but the final resolution of any discrimination claim
         will be submitted to arbitration instead of a court or jury. The
         arbitration proceeding will be conducted under the employment dispute
         resolution arbitration rules of the American Arbitration Association in
         effect at the time a demand for arbitration under the rules is made.
         The decision of the arbitrator(s), including determination of the
         amount of any damages suffered, will be exclusive, final, and binding
         on all parties, their heirs, executors, administrators, successors and
         assigns. Each party will bear its own expenses in the arbitration for
         arbitrators' fees and attorneys' fees, for its witnesses, and for other
         expenses of presenting its case. Other arbitration costs, including
         administrative fees and fees for records or transcripts, will be borne
         equally by the parties. Notwithstanding anything in this Section to the
         contrary, if the Executive prevails with respect to any dispute
         submitted to arbitration under this Section, Cinergy will reimburse or
         pay all legal fees and expenses that the Executive may reasonably incur
         as a result of the dispute as required by Section 7.

9.       CONFIDENTIAL INFORMATION. The Executive will hold in a fiduciary
         capacity for the benefit of Cinergy, as well as all of Cinergy's
         successors and assigns, all secret, confidential information,
         knowledge, or data relating to Cinergy, and its affiliated businesses,
         that the Executive obtains during the Executive's employment by Cinergy
         or any of its affiliated companies, and that has not been or
         subsequently becomes public knowledge (other than by acts by the
         Executive or representatives of the Executive in violation of this
         Agreement). During the Employment Period and thereafter, the Executive
         will not, without Cinergy's prior written consent or as may otherwise
         by required by law or legal process, communicate or divulge any such
         information, knowledge, or data to anyone other than Cinergy and those
         designated by it. The Executive understands that during the Employment
         Period, Cinergy may be required from time to time to make public
         disclosure of the terms or existence of the Executive's employment
         relationship to comply with various laws and legal requirements. In
         addition to all other remedies available to Cinergy in law and equity,
         this Agreement is subject to termination by Cinergy for Cause under
         Section 4b in the event the Executive violates any provision of this
         Section.

                                     -12-

<PAGE>

10.      SUCCESSORS.

         a.       This Agreement is personal to the Executive and, without
                  Cinergy's prior written consent, cannot be assigned by the
                  Executive otherwise than by will or the laws of descent and
                  distribution. This Agreement will inure to the benefit of and
                  be enforceable by the Executive's legal representatives.

         b.       This Agreement will inure to the benefit of and be binding
                  upon Cinergy and its successors and assigns.

         c.       Cinergy will require any successor (whether direct or
                  indirect, by purchase, merger, consolidation or otherwise) to
                  all or substantially all of the business and/or assets of
                  Cinergy to assume expressly and agree to perform this
                  Agreement in the same manner and to the same extent that
                  Cinergy would be required to perform it if no succession had
                  taken place. Cinergy's failure to obtain such an assumption
                  and agreement prior to the effective date of a succession will
                  be a breach of this Agreement and will entitle the Executive
                  to compensation from Cinergy in the same amount and on the
                  same terms as if the Executive were to terminate his
                  employment for Good Reason after a Change in Control, except
                  that, for purposes of implementing the foregoing, the date on
                  which any such succession becomes effective will be deemed the
                  Date of Termination.

11.      DEFINITIONS. As used in this Agreement, the following terms, when
         capitalized, will have the following meanings:

         a.       1934 ACT. "1934 Act" means the Securities Exchange Act of
                  1934.

         b.       ACCOUNTING FIRM. "Accounting Firm" means an accounting firm
                  that is designated as one of the five largest accounting firms
                  in the United States (which may include Cinergy's independent
                  auditors).

         c.       ACCRUED OBLIGATIONS. "Accrued Obligations" means the accrued
                  obligations described in Paragraph 5a(i).

         d.       AGREEMENT. "Agreement" means this Employment Agreement between
                  Cinergy and the Executive.

         e.       AIP BENEFIT. "AIP Benefit" means the Annual Incentive Plan
                  benefit described in Subsection 3b.

         f.       ANNUAL BASE SALARY. "Annual Base Salary" means the annual base
                  salary payable to the Executive pursuant to Subsection 3a.

         g.       ANNUAL INCENTIVE PLAN. "Annual Incentive Plan" means the
                  Cinergy Corp. Annual Incentive Plan or any successor to that
                  plan.

                                     -13-

<PAGE>

         h.       BOARD OF DIRECTORS. "Board of Directors" means the board of
                  directors of the Company.

         i.       CAUSE. "Cause" has the meaning set forth in Subsection 4b.

         j.       CHANGE IN CONTROL. A "Change in Control" will be deemed to
                  have occurred if any of the following events occur, after the
                  Effective Date:

                  (i)      Any "person" or "group" (within the meaning of
                           subsection 13(d) and paragraph 14(d)(2) of the 1934
                           Act) is or becomes the beneficial owner (as defined
                           in Rule l3d-3 under the 1934 Act), directly or
                           indirectly, of securities of the Company (not
                           including in the securities beneficially owned by
                           such a Person any securities acquired directly from
                           the Company or its affiliates) representing more than
                           twenty percent (20%) of the combined voting power of
                           the Company's then outstanding securities, excluding
                           any person who becomes such a beneficial owner in
                           connection with a transaction described in Clause (1)
                           of Paragraph (ii) below; or

                  (ii)     There is consummated a merger or consolidation of the
                           Company or any direct or indirect subsidiary of the
                           Company with any other corporation, other than (1) a
                           merger or consolidation that would result in the
                           voting securities of the Company outstanding
                           immediately prior to that merger or consolidation
                           continuing to represent (either by remaining
                           outstanding or by being converted into voting
                           securities of the surviving entity or its parent) at
                           least sixty percent (60%) of the combined voting
                           power of the securities of the Company or the
                           surviving entity or its parent outstanding
                           immediately after the merger or consolidation, or (2)
                           a merger or consolidation effected to implement a
                           recapitalization of the Company (or similar
                           transaction) in which no person is or becomes the
                           beneficial owner, directly or indirectly, of
                           securities of the Company (not including in the
                           securities beneficially owned by such a Person any
                           securities acquired directly from the Company or its
                           affiliates other than in connection with the
                           acquisition by the Company or its affiliates of a
                           business) representing twenty percent (20%) or more
                           of the combined voting power of the Company's then
                           outstanding securities; or

                  (iii)    During any period of two consecutive years,
                           individuals who at the beginning of that period
                           constitute the Board of Directors and any new
                           director (other than a director whose initial
                           assumption of office is in connection with an actual
                           or threatened election contest, including but not
                           limited to a consent solicitation, relating to the
                           election of directors of the Company) whose
                           appointment or election by the Company's shareholders
                           was approved or recommended by a vote of at least
                           two-thirds (2/3) of the directors then still in
                           office who either were directors at the beginning of
                           that period or whose appointment, election, or
                           nomination for election was

                                     -14-

<PAGE>

                           previously so approved or recommended cease for
                           any reason to constitute a majority of the Board
                           of Directors; or

                  (iv)     The shareholders of the Company approve a plan of
                           complete liquidation or dissolution of the Company or
                           there is consummated an agreement for the sale or
                           disposition by the Company of all or substantially
                           all of the Company's assets, other than a sale or
                           disposition by the Company of all or substantially
                           all of the Company's assets to an entity, at least
                           sixty percent (60%) of the combined voting power of
                           the voting securities of which are owned by
                           shareholders of the Company in substantially the same
                           proportions as their ownership of the Company
                           immediately prior to the sale.

         k.       CHIEF EXECUTIVE OFFICER. "Chief Executive Officer" means the
                  chief executive officer of the Company.

         l.       CINERGY. "Cinergy" means the Company, its subsidiaries, and/or
                  its affiliates.

         m.       CODE. "Code" means the Internal Revenue Code of 1986, as
                  amended, and interpretive rules and regulations.

         n.       COMPANY.  "Company" means Cinergy Corp.

         o.       DATE OF TERMINATION.  "Date of Termination" means:

                  (i)      if the Executive's employment is terminated by the
                           Company for Cause, or by the Executive with or
                           without Good Reason, the date of receipt of the
                           Notice of Termination or any later date specified in
                           the notice, as the case may be;

                  (ii)     if the Executive's employment is terminated by the
                           Company other than for Cause, thirty (30) days after
                           the date on which the Company notifies the Executive
                           of the termination; and

                  (iii)    if the Executive's employment is terminated by reason
                           of death, the date of death.

         p.       DEFERRED COMPENSATION. "Deferred Compensation" means
                  compensation deferred by the Executive pursuant to the Cinergy
                  Corp. Non-Qualified Deferred Incentive Compensation Plan and
                  employer contributions, if any, credited to the Executive
                  under the terms of that Plan.

         q.       EARNINGS. "Earnings" means the Executive's "Earnings" as
                  defined in the Pension Plan but without regard to the
                  limitation of Code paragraph 401(a)(17).

         r.       EFFECTIVE DATE. "Effective Date" means February 12, 2001.

                                     -15-

<PAGE>

         s.       EMPLOYMENT PERIOD. "Employment Period" has the meaning set
                  forth in Subsection 1b.

         t.       EXCISE TAX. "Excise Tax" means any excise tax imposed by Code
                  section 4999, together with any interest, penalties,
                  additional tax or similar items that are incurred by the
                  Executive with respect to the excise tax imposed by Code
                  section 4999.

         u.       EXECUTIVE.  "Executive" means R. Foster Duncan.

         v.       EXECUTIVE RETIREMENT PLANS. The "Executive Retirement Plans"
                  are the Pension Plan, the Supplemental Executive Retirement
                  Plan, and the Cinergy Corp. Excess Pension Plan or any
                  successor to those plans.

         w.       EXECUTIVE SUPPLEMENTAL LIFE PROGRAM. "Executive Supplemental
                  Life Program" means the Cinergy Corp. Executive Supplemental
                  Life Program or any successor to that plan.

         x.       GOOD REASON. "Good Reason" has the meaning set forth in
                  Subsection 4d.

         y.       GROSS-UP PAYMENT. "Gross-Up Payment" has the meaning set forth
                  in Subsection 5c.

         z.       M&W PLANS. "M&W Plans" has the meaning given in Subparagraph
                  5a(ii)(3).

         aa.      LONG-TERM INCENTIVE PLAN. "Long-Term Incentive Plan" means the
                  long-term inventive plan implemented under the Cinergy Corp.
                  1996 Long-Term Incentive Compensation Plan or any successor to
                  that plan.

         bb.      NOTICE OF TERMINATION. "Notice of Termination" has the meaning
                  set forth in Subsection 4e.

         cc.      PAYMENT OR PAYMENTS. "Payment" or "Payments" has the meaning
                  set forth in Subsection 5c.

         dd.      PERSON. "Person" has the meaning set forth in paragraph
                  3(a)(9) of the 1934 Act, as modified and used in subsections
                  13(d) and 14(d) of the 1934 Act; however, a Person will not
                  include the following:

                  (i)      Cinergy or any of its subsidiaries;

                  (ii)     A trustee or other fiduciary holding securities under
                           an employee benefit plan of Cinergy or its
                           subsidiaries;

                                     -16-

<PAGE>

                  (iii)    An underwriter temporarily holding securities
                           pursuant to an offering of those securities; or

                  (iv)     A corporation owned, directly or indirectly, by the
                           stockholders of the Company in substantially the same
                           proportions as their ownership of stock of the
                           Company.

         ee.      RELOCATION PROGRAM. "Relocation Program" means the Cinergy
                  Corp. Relocation Program or any successor to that program, as
                  in effect on the date of the Executive's termination of
                  employment.

         ff.      RETIREES' DENTAL PLAN. "Retirees' Dental Plan" means the
                  Cinergy Corp. Retirees' Dental Plan or any successor to that
                  plan.

         gg.      RETIREES' MEDICAL PLAN. "Retirees' Medical Plan" means the
                  Cinergy Corp. Retirees' Medical Plan or any successor to that
                  plan.

         hh.      SEVERANCE BENEFITS. "Severance Benefits" means the payments
                  and benefits payable to the Executive pursuant to Section 5.

         ii.      SPOUSE. "Spouse" means the Executive's lawfully married
                  spouse. For this purpose, common law marriage or a similar
                  arrangement will not be recognized unless otherwise required
                  by federal law.

         jj.      STOCK RELATED DOCUMENTS. "Stock Related Documents" means the
                  LTIP, the Cinergy Corp. Stock Option Plan, and the Value
                  Creation Plan and any applicable administrative guidelines and
                  written agreements relating to those plans.

         kk.      TARGET ANNUAL BONUS. "Target Annual Bonus" has the meaning set
                  forth in Subsection 3b.

         ll.      TARGET LTIP BONUS. "Target LTIP Bonus" has the meaning set
                  forth in Subsection 3b.

         mm.      TERMINATION. "Termination" means (1) the termination by
                  Cinergy of the Executive's employment with Cinergy other than
                  a termination for Cause or (2) the termination by the
                  Executive of the Executive's employment with Cinergy for Good
                  Reason.

         nn.      VALUE CREATION PLAN. "Value Creation Plan" means the Value
                  Creation Plan of the LTIP.

12.      MISCELLANEOUS.

         a.       This Agreement will be governed by and construed in accordance
                  with the laws of the State of Ohio, without reference to
                  principles of conflict of laws. The captions

                                     -17-

<PAGE>

                  of this Agreement are not part of its provisions and will
                  have no force or effect. This Agreement may not be
                  amended, modified, repealed, waived, extended, or
                  discharged except by an agreement in writing signed by the
                  party against whom enforcement of the amendment,
                  modification, repeal, waiver, extension, or discharge is
                  sought. Only the Chief Executive Officer or his designee
                  will have authority on behalf of Cinergy to agree to
                  amend, modify, repeal, waive, extend, or discharge any
                  provision of this Agreement.

         b.       All notices and other communications under this Agreement will
                  be in writing and will be given by hand delivery to the other
                  party or by registered or certified mail, return receipt
                  requested, postage prepaid, addressed as follows:

                  IF TO THE EXECUTIVE:
                  R. Foster Duncan
                  Cinergy Corp.
                  221 East Fourth Street
                  P. O. Box 960
                  Cincinnati, Ohio 45201-0960

                  IF TO CINERGY:
                  Cinergy Corp.
                  221 East Fourth Street
                  P. O. Box 960
                  Cincinnati, Ohio  45201-0960
                  Attn: Chief Executive Officer

                  or to such other address as either party has furnished to the
                  other in writing in accordance with this Agreement. All
                  notices and communications will be effective when actually
                  received by the addressee.

         c.       The invalidity or unenforceability of any provision of this
                  Agreement will not affect the validity or enforceability of
                  any other provision of this Agreement.

         d.       Cinergy may withhold from any amounts payable under this
                  Agreement such federal, state, or local taxes as are required
                  to be withheld pursuant to any applicable law or regulation.

         e.       The Executive's or Cinergy's failure to insist upon strict
                  compliance with any provision of this Agreement or the failure
                  to assert any right the Executive or Cinergy may have under
                  this Agreement, including without limitation the right of the
                  Executive to terminate employment for Good Reason pursuant to
                  Subsection 4d or the right of Cinergy to terminate the
                  Executive's employment for Cause pursuant to Subsection 4b,
                  will not be deemed to be a waiver of that provision or right
                  or any other provision or right of this Agreement.

                                     -18-

<PAGE>

         f.       This instrument contains the entire agreement of the Executive
                  and Cinergy with respect to the subject matter of this
                  Agreement; and subject to any agreements evidencing stock
                  option or restricted stock grants described in Subsection 3b
                  and the Stock Related Documents, all promises,
                  representations, understandings, arrangements, and prior
                  agreements are merged into this Agreement and accordingly
                  superseded.

         g.       This Agreement may be executed in counterparts, each of which
                  will be deemed to be an original but all of which together
                  will constitute one and the same instrument.

         h.       Cinergy and the Executive agree that Cinergy Services, Inc.
                  will be authorized to act for Cinergy with respect to all
                  aspects pertaining to the administration and interpretation of
                  this Agreement.

         IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.

                                         CINERGY SERVICES, INC.


                                         By:_________________________________
                                            James E. Rogers
                                            Chairman and Chief Executive
                                            Officer


                                         EXECUTIVE



                                         By:_________________________________
                                            R. Foster Duncan


                                     -19-